Winning the innovation race: Insights from game theory and microeconomics

This study examines the impact of first-mover advantage on firms' innovation processes from a microeconomic perspective, with a particular focus on game theory and the game of chicken. The primary research question is to ascertain how the timing of innovation affects a firm's competitive advantage. The objective of the study is to gain insight into the factors that contribute to a successful first-mover strategy and to elucidate the manner in which these factors interact within the framework of game theory. Methodologically, the study employs game theory to analyse strategic decision-making in innovation, with a particular focus on the game of chicken to illustrate conflict scenarios in which firms compete for market advantage. The research examines the characteristics of firms, markets and products through a review of the literature in order to identify the key variables that contribute to first-mover advantage. The findings demonstrate that a number of internal factors (such as managerial capacity for innovation and the firm's overall innovation capability), external factors (including participation in innovation networks and market orientation) and product characteristics (such as product class and environmental awareness) are significantly associated with an increased likelihood of a firm achieving first-mover advantage. In conclusion, the study confirms that firms that effectively manage these factors gain a competitive advantage by being the first to market.